Real estate investing is all about perception. Your perception of where the market is going, along with where it is actually going. The goal, as always, is to buy low and sell high.
You want to buy a cheap piece of land and sell it as a high-priced developed real estate property, after it appreciates enough to make a sizeable profit. Selling property is an art in itself.
Buying an initial piece of land lends itself to some solid and rational guidelines:
First, look at the trend lines for home prices in your area. While most housing markets are in decline (and the housing markets in Florida and California are adjusting after more than a decade of overvaluation), there are markets where house prices are rising. This is a decent leading indicator that there is a market for expansion.
Second, look for work-related news. Home purchases require a constant source of income. New employers moving to a city or opening a government branch are a strong indicator that good, well-paying jobs are likely to emerge. Where high-paying jobs rest, home purchases follow.
In this regard, speak with your local city planning office. Are there recent purchases of “rights of way” to install sewer lines? Is the local phone cable making plans to deplete fiber optic lines, a “must do” trend in new home construction? These things point to areas where home growth is immanent. Other big signs are the issuance of school bonds (found in the local newspaper) and the opening of new parks.
Before looking at the land, check the use of adjacent commercial real estate. Look for “family friendly” or “home friendly” commercial properties: Homes that are close to grocery stores and clothing stores tend to command a higher price than those that are further away. If there is a movie theater nearby, or plans for an elementary or high school, consider the size of the houses you will build and what your amenities will be; Buyers looking for those features are looking for “superior” homes, with a little more floor space and two (or three) bedrooms for the kids. Other places to look are anchor stores such as Wal-Mart and Best Buy. These companies spend millions on shopping pattern surveys before purchasing a store location; If you are buying a parcel of land, you have about a year to a year and a half period to search for single-family residential properties and residential rental properties in nearby real estate properties.
You can even turn this around – if you can talk to a group of commercial real estate investors, building a mall as a hub for home development is also a viable combined strategy. This also applies to very urban areas. Many downtown areas that have been abandoned by businesses may be converted to apartment buildings, and some of the older housing projects are being torn down for mixed-use spaces with combined commercial and residential areas. In particular, you can often get block grants to help finance projects like this, and there are HUD programs that can help a lot with “urban renovations.”
Another source to research is demographics for your area. Look at the US Census figures (and local county figures) to see the median age and per capita birth rate. You want to invest in areas where the population is already growing. The high biases in the 1940s and 1950s indicate that there is a group of people who will be retiring soon, and retirees are very likely to sell property. Places to look closely are most urban parts of California and large swaths of the rural Midwest, where demographic trends have been shifting entire towns since the 1950s as the country’s population has moved into areas. urban.
If there is a local planning council or urban development council, be sure to get the minutes of all the meetings from the past year. The city council offices will have them on file as a matter of public record. Also try to participate in the next series of meetings as an observer. Discuss with city and county managers where they see housing and construction trends moving. What you are looking for is real estate that will be desirable in two or three years; look at road planning atlases and find all the data you can find. Also look for real estate that is scenic – lakefront property is the closest to a guaranteed bet you can get in real estate investments, especially if there is a lake that is at the “far end” of a development hub. Likewise, if there is land the city is looking to acquire for parks, buying the adjacent lots now means you can sell it later.
Lastly, talk to professionals in your communities. Talk to architects who can tell you if they are busy or not. Maintain professional contacts with engineers, bankers and lawyers. Usually they will know about projects long before the general public. Also get in the habit of reading the business section of the local newspaper. Often the first clue that a business may move into your area is buried at the bottom of a column on page 8.
Using the guidelines suggested above will help you find “sleeper” raw earth properties. These “sleeper” properties are perfect for the buy low and sell high strategy used by successful commercial real estate investors.